Feb 14, 2017 01:54 PM IST | Source:

Sell Marico; target of Rs 225: Axis Direct

Axis Direct is bearish on Marico has recommended sell rating on the stock with a target price of Rs 225 in its research report dated February 08, 2017.

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Axis Direct's research report on Marico

Q3FY17 consolidated net sales, EBITDA, and adj. PAT declined7%, 6%, and 7%. India volume declined 4% YoY with healthy 6% volume growth in Saffola, mild 1% decline in Parachute and sharp 12% decline in VAHO (value added hair oil). International sales stood flat YoY (2% growth in constant currency). India OPM was up 110 bps YoY at 24.3% while International OPM was down430 bps YoY at 16.1%.


Volume growth of 8-10% (management guidance) along with low inflation implies sales CAGR of 13% over FY17-20. Peak margin (18.7% in FY17E vs. 12.8% in FY12) restricts EPS CAGR to only 10% over FY17-20. We cut our FY17-18 earnings estimate by 5-6%. Valuations at FY18 P/E of 38x remain expensive. Maintain SELL with revised target price of Rs225 based on P/E of 30x (vs. Rs 230 earlier).

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